ASSIGNMENT 1
Managerial Accounting and Analysis
Submitted ByAmbika Sharma
(epg27-022)
1. Given here are a few situations. REQUIRED
State the accounting assumption or principle that describes each of the given situations.
a. Inventory is recorded at its purchase price. -> Cost Concept
b. Financial Statements are prepared on an annual basis. -> Accounting Period Concept
c.
Personal and business transactions are separately maintained. -> Business Entity Concept
d. Expenses are recognized in the same period as the related revenues. -> Matching Concept
e.
The death of the chief executive officer of the company is not recorded in accounts. -> Money
Measurement Concept
f.
In case of doubt, it is considered better to understate rather than overstate income. ->
Conservatism or Prudence Concept
g. Assets are not stated at their liquidation value. -> Cost Concept
h. The accounting records only events that affect the financial position of the entity and at the same
time can be reasonably determined in monetary terms. -> Money Measurement Concept
i.
Same treatment is given to comparable transactions from period to period. -> Consistency
Period
j.
Revenue is recognized when it is earned and expense is recognized when it is incurred. ->
Accrual Concept
2. The manager of a company who did not have proper accounting knowledge prepared the
following balance sheet. He has wrongly classified the items under assets, liabilities and owners
equity.
Owners Equity and
Liabilities
Assets
Share Capital
10,00,000
Retained Earnings
5,00,000
Equipment
9,00,000
Land and Buildings
7,00,000
Cash
2,00,000
Long term loan
4,00,000
Accounts Payable
2,00,000
Accounts Receivables
3,00,000
21,00,000
21,00,000
REQUIRED:
Prepare the correct Balance sheet.
Answer 2) Below is the correct balance sheet:
BALANCE SHEET
Owners Equity
Amount
& Liabilities
(Rs.)
Share Capital
Assets
Amount
(Rs.)
10,00,000 Equipment
9,00,000
Long-Term loan
4,00,000 Cash
2,00,000
Accounts Payable
2,00,000 Land & Buildings
7,00,000
Retained
5,00,000 Accounts
3,00,000
Earnings
Receivables
21,00,000
21,00,000
3. Using Accounting Equation, answer the following independent questions.
a) New Companys assets are 250 lakh and its external liabilities are of 100 lakh, determine
the amount of owners Equity.
Answer a)
Owners Equity =
Owners Equity =
Owners Equity =
Total Assets - Total Liabilities
Rs. 250 Lakh - Rs. 100 Lakh
Rs. 150 Lakh
b) Royal Industries has total assets of 100 lakh and owners Equity of 70 lakh, Compute the
amount of external liabilities.
Answer b)
Liabilities
Liabilities
Liabilities
=
=
=
Total Assets - Owners Equity
Rs. 100 Lakh - Rs. 70 Lakh
Rs. 30 Lakh
c) Small Enterprise has following amounts appearing in Balance Sheet as at 31 st December,
2014:
Capital 50 lakh, Reserves and undistributed profits 15 lakh, and total external
liabilities 35 lakh, Determine the amount of total assets.
Answer c)
Total Assets
Total Assets
Total Assets
=
=
Total Liabilities + Owners Equity
50,00,000 + 15,00,000 + 35,00,000
=
Rs. 100 Lakh
c) At the beginning of the accounting year, Supreme Industries had total assets of 1700 lakh
and its total external liabilities of 1000 lakh. During the year total assets increased
by 300 lakh and total liabilities decreased by 160 lakh, compute the amount of owners
equity at the end of the year.
Answer d)
Owners Equity
= Total Assets - Total Liabilities
Total Asset during the period
= 17,00,00,000 + 3,00,00,000
Total Asset during the period
= Rs. 20,00,00,000
Total Liability during the period
= 10,00,00,000 - 1,60,00,000
Total Liability during the period
= Rs. 8,40,00,000
Owners Equity
= 20,00,00,000 - 8,40,00,000
Owners Equity
= Rs. 1160 Lakh
4. Following are ledger balances extracted from the ledger of a company.
REQUIRED- Prepare a Trial Balance.
Share Capital
25,00,000
Plant
4,00,000
Buildings
9,00,000
Sales
42,00,000
Purchases
40,00,000
Salaries
6,00,000
General Expenses
2,00,000
Rent received
50,000
Long term Loan
2,00,000
Accounts
Receivable
6,00,000
Accounts Payable
3,00,000
Cash at Bank
5,50,000
Answer 4) Following is the trial balance sheet:
S.
PARTICULARS
LF
DEBIT (RS)
CREDIT (RS)
No.
1
Share Capital
Plant
4,00,000
Buildings
9,00,000
Sales
Purchases
Salaries
Rent Received
General Expenses
Long term Loan
2,00,000
10
Accounts Payable
3,00,000
11
Accounts Receivable
6,00,000
12
Cash at bank
5,50,000
TOTAL
25,00,000
42,00,000
40,00,000
6,00,000
50,000
2,00,000
72,50,000
72,50,000
